Friday 28 February 2014

'OPERATION RICO' targets 'Boiler Room' fraud.

Around about 15 years ago, the name of one of golf's all-time greats, Gary Player, was used to perpetrate an extensive 'Boiler Room' fraud. This global crime was particularly targeted at prosperous, but gullible, Australians and New Zealanders.

The term, 'Boiler Room,' arrived during the 1970s inside American political parties to describe the practise of using a central office connected to multiple phone-lines (manned by party-activists) to seduce prospective voters across the nation. Supporters of (Republican) President Richard Nixon, are known to have employed the same practise in reverse - i.e. they cold-called thousands of known swing-voters in the middle of night in key states, and pretended to be aggressively canvassing for the Democrats. The term 'Boiler Room fraud,' is thought to have been coined in the 1980s, to describe members of the American 'Mafia' who adopted similar, industrial cold-calling tactics to contact as many potential victims as possible. 

'Boiler Room' gangs (so-called, because of the high-pressure techniques they use, and low-profile premises from which they habitually operate) pose as stock broking firms with hot-tips based on inside information, to deceive victims into buying valueless fake 'investments.'

 'Boiler Room' has even been used as the title for a Hollywood movie

During the past two years, 14 Boiler Room gangs have secretly been targeted by a British-led coalition of law enforcement agencies, in what has been widely-described as 'an unprecedented international crackdown on fraud.'
'Operation RICO' (presumably named after the US federal Racketeer Influenced and Corrupt Organizations Act, 1970), has so-far produced 110 arrests - mostly in Spain and the UK. Ironically, there is currently no RICO-style anti-racketeering legislation in the UK. However, to-date there are 850 confirmed 'Boiler Room' victims in the UK with combined losses of approximately £50 millions, but these figures do not accurately represent the full extent of the problem, because, classically, most fraud victims remain silent out of fear, shame and embarrassment.

Detectives have said that 'the aim of the two-year Operation RICO,' was to 'decimate' Boiler Room fraud in Europe.' Presumably, by 'decimate,' they meant 'destroy,' because 'decimate' is one of the most misused words in the English language. Originally, in the ancient Roman army, it meant to execute one in ten as a punishment when a Legion fought poorly or exhibited cowardice in the face of the enemy.

The UK National Economic Crime Co-ordinator, Commander Steve Head.

'It is our most important investigation ever, targeting people we believe are at the top of an organised crime network that has been facilitating Boiler Rooms across Europe and which is suspected of being responsible for millions of pounds of investment fraud.'

Wanted: Graham Hawrysh, 37, is suspected of helping to set up and manage a number of boiler rooms based in SpainSuspected: Jeffrey Gordon, 54, is believed to be involved in the set-up and management of various boiler rooms. He has links to Romania, and possibly Colombia or Ireland, and his aliases are Jeffrey Darren Goodman and Michael Goodman

Robert Douglas Lynch, 53, s believed to be involved in the set-up and management of various boiler rooms through alias namesTunch Kashif, 48, is believed to have been engaged in various investment frauds over a period of several years

Still Wanted 

Graham Hawrysh (top left), Jeffrey Gordon a.k.a. Jeffrey Goodman a.k.a. Michael Goodman (top right), Robert Lynch (bottom left), Tunch Kashif (bottom right).

'Operation RICO,' was led by City of London Police officers. Targets for investigation, were described as 'ten, tier-one criminals' suspected of being linked to organised crime and drug trafficking. Nine of them are British, one is a South African.

Britain's 'Operation RICO,' involved the Spanish police and various other international law enforcement agencies, including the US Secret Service.

An Aston Martin is towed away from alleged fraudster's home in Barcelona

This week, 84 arrests were made in Spain in raids by 300 officers including 40 officers from the UK. A further 20 persons were arrested in the UK, 2 in the USA and 4 in Serbia. A number of luxury vehicles and properties were seized.

Police have said that typical British 'Boiler Room' victims have lost from £2,000 to £500,000. However, the 'Financial Conduct Authority' has admitted that a least £200m is being taken from UK citizens in 'Boiler Room' frauds each year, and that the largest individual loss recorded by UK police, is a staggering £6 millions.

Those caught by 'Boiler Room' gangs are generally vulnerable, commercially-inexperienced individuals aged 40 and over, but many are in their 70s and 80s. Police admit that a significant number of destitute victims have already committed suicide.

The criminals cold-call their prey, using classic, coercive behaviour modification techniques - pretending affinity with potential victims - tricking them into parting with their money whilst giving them the illusion that they are always making free-choices. Victims are initially told of attractive returns of 10 to 20% per year. They are then pointed to fake commercial Websites and brochures and told that, if they hurry, they can still invest in secure bonds backed by famous legally-registered companies. Some victims have been paid 'dividends,' to lure them further into the trap.

Divorcee Joan Mayer, 78, from Hampshire was scammed out of a six-figure sum over a period of two-and-a-half years by a series of cold callers

One British woman, Joan Mayer (aged 78), courageously admits to being tricked (over a period of two and a half years) into handing over £23,000 in exchange for valueless fake carbon credits, and shares in anti-malaria products and rare earth metals. She was then coerced by another crook, posing as 'a salesman,' into borrowing £140,000 to buy valueless fake 'shares in a gold mine.'
'I wanted to start investing what I had very carefully, to build a pension for my daughter... that is what mothers do. When I had the first call about investing in carbon credits I thought that was the beginning.
...I was very interested in the idea so I agreed to invest and I was then sold some more carbon credits and the same seller, who by this time had become quite a pal, then suggested investing in rare earth metals.
... I had lots of brochures sent to me and he promised me that the rewards would be considerable.
...Over a period of many weeks I felt I got to know him quite well. He was very helpful and thoughtful and he kept in touch regularly.
 ...Over a period of days I agreed to see if I could get more equity out of my house – which I foolishly did.
...It was only when that ('gold mine') flotation mysteriously managed not to happen that I released that I was deep in it.'

According to the police, just as was depicted in the Hollywood movie (released in 2000), today's 'Boiler Room' gangs comprise a book-keeper, money launderer and lawyer, as well as a network of 'salespeople.' Classically, the cold-callers are trained to  sound friendly and respectable and to recite a '100% positive' closed-logic script . In general, they are young men (and sometimes women), who speak good English and who generally pretend to be older than their years. A significant number of recently-arrested 'Boiler Room' salesmen, are apparently naive, and/or greedy, unemployed university graduates from Scandinavian countries, who have responded to what they were led to believe were authentic advertisements for commission-related, 'job/income opportunities.'

The UK police acknowledge that they cannot eradicate 'Boiler Room' fraud, and that by forcing the gangs behind it, out of Spain, they are probably only shifting the centres of operations (that have been targeting UK citizens), to non-European countries like Thailand, Indonesia and the United Arab Emirates. The cultic aspect of 'Boiler Room' fraud also seems to have begun to register with the press and police, because they already accept that the cold-callers are both perpetrators and victims, and that they are not the main beneficiaries. 

The only journalist I have spoken to about boiler room fraud told me that the UK police estimate that the 14 gangs recently arrested, were 'cold-calling on average several thousands of UK homes per day, and that their salespeople worked  from morning till night, 7 days per week.' Apparently, these calls were were not aimed at random targets. The contact-details of potential victims, are known to have been harvested off the Internet using lawful and unlawful means. Sources of information have included electoral rolls and press announcements of deaths (these list details about the occupation of the deceased and their surviving relatives). Another source of information has been credit-rating agencies, banks and the stock market itself, because (for commercial purposes) information is held by financial institutions and stock-broking firms about buyers of shares. When public utilities were privatised back in the 1980s, millions of UK citizens bought a few shares. Apparently, with the right IT specialists and equipment, it is child's play to break into databases and compile lists of potential 'boiler room' fraud victims who have access to capital. The most-vulnerable profile seems to have been elderly or middle-aged, widowed, divorced or unmarried women without debts, and who have invested in a few safe shares in the past, and who are likely to trust psychologically-dominant men pretending affinity and presenting themselves as experienced stock brokers. 

In brief, due to its scale, 'boiler room' fraud is a form of industrialised psychological, and economic, warfare, and the generals directing it, have almost unlimited resources available to them.

The first questions I have for anyone cold-calling me, are:

Who are you? 

Where have you got my number from?

What inducements have you been offered to call me? 

Evidently, no one in the UK government has been clearly advising ordinary citizens to take the same common-sense approach.

David Brear (copyright 2014)


  1. It would be a good idea if cold-calling was made a crime.

    1. Freeman - A campaign of public information might be a much better idea, because (in our age of global telecommunicatons) any national law banning cold-calling, would be effectively-impossible to enforce. Also, in the case of 'MLM income opportunity' frauds, the people who are likely to cold-call reciting a '100% positive' script, are your own friends and relatives.

    2. David - the UK's Action Fraud Website warns people that 'share sale, boiler room, hedge fund or bond fraud involves bogus stockbrokers, usually based overseas, cold calling people to pressure them into buying shares that promise high returns. In reality, the shares are either worthless or non-existent.

      You are usually contacted out of the blue by a professional-sounding stockbroker who offers you investment opportunities that seem too good to be true. You are also promised free research reports, special discounts and ‘secret’ stock tips.

      In reality, the fraudsters are cold calling as many people as possible, persuading them to invest in shares that are either non-existent, or so worthless they are impossible to sell.

      The fraudsters may provide false share certificates and other documents to make the investments seem credible.

      Once the fraudsters have squeezed whatever money they can from investors, they quickly disappear.

      Share sale frauds tend to start with a telephone call out of the blue. Using hard-sell techniques, the fraudsters try to pressure you into making rushed decisions, giving you no time to consider the nature of the investment.

      As with many fraudulent schemes, you’re encouraged to keep your investment secret to ensure you receive maximum returns. This allows the fraudsters to hide the real nature of their scheme.

      Fraudsters aim to make their business seem legitimate, so they will often use technical jargon, impressive job titles and mock websites to appear credible.'

    3. Anonymous - The problem here, is that few people go and read the Action Fraud website, until they become victims of fraud. Yet the existence of Boiler Room fraud, ought to be common knowledge.

      One would have thought that an entertaining public information campaign, warning people not to talk to strangers offering the adult-equivalent of sweets, would be one of the most cost-effective methods of reducing this type of crime.

  2. I'm a retired television researcher. I was involved in the investigation of similar frauds that were all the rage in the UK some years back - Vanity Publishing.

    The fraudsters registered publishing companies and then advertised in national newspapers and magazines for new authors to send in manuscripts. No matter what rubbish was sent, the companies immediately said it would sell and they agreed to publish it, but the authors had to pay. Once victims were hooked, more and more money was extracted. In the end, all the victims got were boxes full of tatty remaindered books. In some cases, victims threw away tens of thousands of pounds.

    Vanity publishing victims were too embarrassed to complain.

    1. Thanks anonymous - In fact, I remember watching a television magazine show on the BBC which investigated vanity 'publishing' houses. This was probably back in the 1980s.

      The world is full of ill-equipped people who dream of becoming full-time writers, just as the world is now full of ill-equipped people who dream of becoming full-time investors and business owners.

      Criminals simply act like mirrors, and reflect back their victims' own existing beliefs and instinctual desires as reality.

      Due to a lack of complaint, vanity 'publishing' companies existed, and multiplied, for decades in the UK, before the worst offenders were successfully challenged by civil regulators in the UK, who claimed back all the money they had taken illegally and filed public interest bankruptcy petitions against them, in the High Court.

      'Minerva', 'Pentland' and 'Serendipity' were three of the biggest vanity 'publishing' scams in Britain.

      Without checking, I can't remember whether any criminals behind the fake 'publishing' companies, were ever charged with fraud in Britain.

      In 2007, the UK regulators tried the same bankruptcy petition tactics on 'Amway UK Ltd,' a legally registered company that had been peddling hundreds of thousands of people vanity 'direct selling businesses,' but only part of the scam was presented in court, and the bankruptcy petition did not succeed.

      Currently, there are numerous vanity 'business' frauds operating in plain sight in the UK, some of these, like 'Amway UK Ltd.,' have been legally-registered for decades.

      Again, due to an absense of mainstream media interest and resulting lack of complaint, regulators and law enforcement agents, do nothing to stop vanity 'business' frauds.

      David Brear (copyright 2014)

    2. 'Vanity business frauds'

      I've never heard that one before. How does it work?

    3. Anonymous - Please take a look at the many articles on my Blog to find a detailed explanation, and a list of the worst vanity 'business,' corporate offenders.

      In brief, for decades, criminals have hidden behind, legally-registered, but fake, 'direct selling' companies and offered endless chains of ill-informed individuals there 'very own home-based businesses,' which they insist are based on 'selling exclusive good-value products, and/or services' and on recruiting networks of further 'business-owning' sales agents or 'distributors'.

      These corporate structures style themselves as 'Multi-Level Marketing' ('MLM') companies, but they have been a front for a form of major racketeering activity: comprising blame the victim closed-market swindles or pyramid frauds, and related advance fee frauds.

      In reality, once victims have signed up, they have been told by charismatic persons claiming to have made millions (pounds/dollars/Euros) that they can only achieve 'financial freedom' in 'MLM' by 'exactly duplicating a proven plan.'

      The 'plan' comprises, buying a fixed quota of banal, over-priced products, and/or services, each month, and recruiting others to duplicate the same plan, etc. ad infinitum. In other words, in 'MLM' rackets, little or no money has come from authentic sales to the general public (based on value and demand); it has mostly come from unlawful losing investment payments (based on the expectation of future reward), but laundered as lawful sales (based on value and demand).

      Victims have been told that in order to achieve 'financial freedom' they must also exactly duplicate the behaviour and attitudes of the most successful 'multi-millionaire MLM Distributors'.

      In the majority of cases, 'MLM' victims waste a small quantity of time and money, and quit after discovering that it is effectively impossible to recruit and maintain further active recruiters. Few have ever complained, because that would involve admitting that they were duped, and many have been recruited by their own friends and relatives.

      In a significant minority of cases, victims (usually with access to independent funds) have continued for years as de facto slave recruiters, programmed to ignore their mounting losses and to exclude from their lives anyone challenging the authenticity of the 'MLM' Utopia. Like gambling addicts, some victims have gone massivey into debt falsely-believing that one day 'MLM' will work for them and all their 'dreams' will be achieved. Some 'MLM' victims have fallen for several 'MLM' frauds. In the very worst cases, destitute 'MLM' victims have killed themselves.

      Over the decades, the bosses of the front companies of this type of dissimulated organized crime, have grown so rich and powerful, that they have effectively bought immunity from prosecution in the USA and elsewhere. Furthermore, the mainstream media has never really tackled this problem and the reality-inverting term 'MLM' is now often used by the press as though the financially sucidal theory of 'endless chain recruitment + endless payments by the recruits = endless profits for the recruits,' is perfectly viable and lawful.

      David Brear (copyright 2014)

    4. How much do the worst 'MLM' victims 'invest?'

    5. Anonymous - Apart from their monthly purchases of effectively-unsaleable wampum (usually totalling two or three thousands pounds per year), chronic 'MLM' adherents, have to pay all their own allied expenses. They are also led to believe that they should buy 'training an motivation' programs: comprising endless publications, recordings, tickets to meetings, etc., on the pretext that these 'optional' materials 'contain secrets vital to achieving success in MLM.'

      The worst 'MLM' victims I've encountered in Britain have wasted a total of up to twenty thousands pounds annually and have persisted for periods in excess of 15 years.

      Because the destitute chronic 'MLM' victims' 'training' has constantly told them that 'only people who believe 100% that they will succeed in MLM, actually succeed in MLM,' it has been child's play to convince such persons that failure to make money must have been entirely their own fault.

      David Brear (copyright 2014)

  3. When I get one of these slick-ass fraudsters calling me I pull them in to MY game.
    If one of you is reading this and has spent the better part of four calls to me, each one more detailed and promising than the one before, only to get laughed at on your last call, YOU COLD-CALLED ME.